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Avoid the Hidden Pitfalls of Survivor Bias in Business Strategy

Planes flying and one plane finding a different path

History has much to teach us. It also can mislead us into expecting positive results from the past to repeat. This bias can create false expectations in business, driving companies to play the “follow the leader” game. Companies that play this game often do not achieve the same market recognition, results, or valuation as their history making industry-leading competitors. Many completely fail. The root cause can often be attributed to a poor business strategy that did not consider survivor bias. This cognitive distortion arises when decision-making is based solely on successful outcomes, ignoring failures that don't make it into the final analysis.


This article delves into the implications of survivor bias on business strategy, demonstrating how it can lead to flawed decision-making by creating an illusion that success is more common than it is. By understanding survivor bias, businesses can adopt more effective strategies and increase their odds of winning in the marketplace.

Understanding Survivor Bias


Survivor bias is a form of selection bias that occurs when only successful outcomes are considered, while failures or the reasons for failures are ignored or discounted. This skew in data can significantly distort reality, leading to overly optimistic beliefs about what it takes to succeed and not identifying the actual reasons for success. For instance, if an investor only looks at successful companies without considering the numerous failures, they may assume that success is more easily attainable than it truly is and also deduce that success is based on a set of irrelevant information.


Although related, selection bias differs from other biases like confirmation bias or availability heuristics, which involve favoring information that strengthens belief and the misjudgments of probability or recall errors driven by what is easily accessible. Survivor bias specifically involves ignoring failures and only focusing on survivors.


In business, it manifests itself when companies model their strategies on successful firms without considering the many more that have failed to reach the same heights or even failed under similar circumstances. This leads to strategic decisions based only on successes without fully understanding the risks and failures that accompany many ventures.


The good news is that those who can expand their horizon can significantly increase their potential for success.


Historical and Contemporary Examples of Survivor Bias


There are many historical examples of survivor bias in personal, business, and military strategy, where only successful outcomes were studied and replicated, ignoring failed outcomes that could have provided valuable lessons.


Part of the motivation for writing this article is the recent Apple series, “The Bloody Hundredth.” This series follows a bomber group through World War II. The crews of bombers often made their harrowing runs above enemy territory, and unfortunately, very few returned to base.  As a viewer, I was interested in learning more about these heroes. After a quick search on the internet, I was surprised to see a link to survivor bias and how the military utilized it to their advantage to help bring more crews home safely.

In the case of World War II bombers, the natural inclination was to ask what the successful returning bombers had in common. At first, that is what the military considered, and they reinforced the bomber's damaged area to match those that had returned successfully. They were surprised when, after this adjustment, they saw little improvement in the success rate.

After studying the problem more, military strategists considered survivor bias. They applied the work of statistician and mathematician Abraham Wald to help the armored aircraft maximize their chances of returning from combat.


Wald’s work suggested reinforcing the parts of returning planes that showed no damage. He reasoned that planes that did not return were likely hit in the undamaged areas observed in returning planes and deduced that those areas were critical to the planes' ability to fly. Thus, the undamaged areas on the returning planes represented the most vulnerable spots on the aircraft that were shot down. [1] [2]


In the business world, companies often fall victim to survivor bias by trying to replicate the success stories of their competitors without acknowledging their unique circumstances and ignoring the many more companies struggling to succeed or that fail outright under similar conditions. 


The Dangers of Modeling Strategies After Market Leaders


The common misguided mindset, "They did it this way, so if I do it similarly, I will achieve the same result while excluding all the others who did not or do not get the same result," is dangerously flawed. This perspective leads many businesses to overestimate the probability of success and overlook unsuccessful companies, focusing only on a few top performers they imagine emulating. The leaders of these companies often only accept information that agrees with their vision, so they ignore anything counter to their self-assured belief that they are somehow different than the rest of the marketplace


This is a common phenomenon in the technology sector. The same pattern has repeated over the past few decades as an innovator emerges, makes a splash, goes public, and then the gold rush ensues. The market then gets flooded with companies working to keep up and profit from the trend, with often very little differentiation. Sadly, they are frequently too late and compete in an oversaturated market with shrinking margins and under-capitalized finances.


This has played out with the dotcom, mobile applications, online music and video, streaming, social platforms, electric vehicles, and artificial intelligence. It can impact companies, large and small.


It is easy to be blinded into trying to become the next OpenAI, Google, Meta, Apple, etc. and dream about raising billions rather than look at the many failures in the start-up market. A New York Times article titled, From Unicorns to Zombies: Tech Start-Ups Run Out of Time and Money by Erin Griffith illustrates the challenges many emerging companies face and the importance learning from the survivors and non-survivors to maximize the probability of success. [3]


“About 3,200 private venture-backed companies around the world have gone out of business this year, according to data compiled for The New York Times by PitchBook, which tracks start-ups. Those companies had raised $27.2 billion in venture funding. PitchBook said the data was not comprehensive and probably undercounts the total because many companies go out of business quietly. It also excluded many of the largest failures that went public, such as WeWork, or that found buyers, like Hopin.”


Survivor bias can and often does lead to unrealistic financial projections and valuations. By only considering companies that have thrived economic models may greatly overestimate potential returns and underestimate the risks.


Companies often expect to achieve valuations similar to those of successful well publicized unicorns. This expectation can lead to strategic missteps, such as overinvesting in ventures, products or inititaives with low chances of success, based on misinterpreted financial landscapes, or many other attributes based on an overly optimitic picture.


It is important to remember this does not mean companies can’t succeed. They need a complete strategy to avoid survivor bias.


Overcoming Survivor Bias


By understanding this bias, organizations can make more informed decisions based on a balanced view of history and data rather than cherry-picked successes. They can out-think the competition to serve the market and themselves better.


Incorporate Comprehensive Data Sets

Companies should integrate successes and failures into data analyses to combat survivor bias. This approach provides a more balanced view and helps make more informed decisions.


Apply Critical Thinking Techniques

Maintaining objectivity in decision-making is crucial. Structured analytic techniques and frameworks can help businesses avoid the pitfalls of survivor bias by fostering a culture of critical evaluation and evidence-based decision-making.


Value Innovate

By adopting holistic and well-rounded strategic planning approaches like a Blue Ocean Strategy that stresses high-value and minimizes or eliminates low-value differentiation, businesses can more effectively develop a business offering that can win by navigating the complex landscape of the market, mitigating the risks associated with survivor bias. [4]

Learn From More Than The Obvious


The lessons drawn from understanding survivor bias are critical for business strategy development. Successfully cutting through the noise is often difficult in today’s viral and social media headline world, which often underrepresents the comprehensive landscape by amplifying success stories. Companies that focus exclusively on the paths taken by market leaders without acknowledging the complexities and challenges that come along with those successes risk basing their strategies on an incomplete and potentially misleading data set. By adopting a more balanced approach that incorporates both successes and failures, companies can create more resilient and adaptable strategies to the realities of the business environment.


Additionally, overcoming survivor bias requires a deliberate shift in strategic thinking—from emulation to value innovation, from partial data to comprehensive analysis. By expanding perspective to include the full spectrum of outcomes, businesses can better position themselves to anticipate challenges and seize opportunities others may overlook. This holistic approach not only guards against the pitfalls of survivor bias but also enhances a company's ability to think critically and repeatably innovate in a way that the market values and quite possibly become the next great success story.


References and Citations


  1. Penguin Press. (2016, July 14). An excerpt from "How Not To Be Wrong" by Jordan Ellenberg. Medium. Retrieved from

  2. Ellenberg, J. (n.d.). How Not To Be Wrong. Retrieved April 22, 2024, from

  3. Griffith, E. (2023, December 7). From Unicorns to Zombies: Tech Start-Ups Run Out of Time and Money. The New York Times. Retrieved on April 2, 2024 from

  4. Mauborgne, R., & Kim, W. C. (2017). Blue ocean shift: Beyond competing - Proven steps to inspire confidence and seize new growth. Hachette Books.


Blue Ocean®, Blue Ocean Shift®, and Blue Ocean Strategy® are registered trademarks and intellectual property owned by Kim & Mauborgne.


Images and Media

Cover image, Microsoft Stock Image Photos, April 21, 2024


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